Financial Justice

What would Congress do —if anything— to tame Wall Street and the nation’s lenders following the Financial Meltdown of
2008? This nonfiction narrative tells the inside story of how an alliance of consumer,
civil rights, labor, fair lending, and other progressive groups emerged to effectively
challenge Wall Street and its official protectors and to win substantial new legislative
reforms. After decades of declining power on the legislative scene, these citizen
campaigners came together to work for the Dodd-Frank bill and create a new financial
regulatory with clout – the Consumer Financial Protection Bureau (CFPB).

This book, based largely on extended interviews with over thirty of the leading advocates,
introduces readers to the players and follows the uncertain developmental course of
the Consumer Financial Protection Board from the initial vision of Elizabeth Warren
through the roller-coaster deliberations of a fractious congress, all the way to final
passage. As much as anything, the story is a penetrating case history of the revitalization
of citizens’ lobbying.

The authors argue that the unusual victory of average citizens over powerful financial
interests was achieved by dint of a coalition approach to advocacy, strong congressional
leadership, and the salience of the financial crisis to working and middle class Americans.
In large part, the campaign victory was driven by an unusually inclusive citizens’
coalition powered by experienced leaders, a savvy, country-wide public communication’s
strategy, and sufficient political and financial resources to be heard in the public
arena over the din created by well-organized industry voices. The book contributes
to scholarly understanding and public debate about the ability of social movements
to achieve their goals in today’s politics. It highlights the formation and management
of a new form of collective social action -- cross-movement coalitions and campaigns.

The book features a Foreword written by Congressman Barney Frank and an Afterword
written by Professor Norman I. Silber, based on an interview with now-Senator Elizabeth
Warren.

“An extraordinary accounting of an issue campaign spearheaded by the policy vision
of Elizabeth Warren, the organizing skills of Heather Booth and the legislative talents
of Barney Frank – and powered by the people. [This book is] essential reading for
anyone who wants to learn how victory was achieved and use those lessons to continue
the fight for economic justice.” - Congresswoman Jan Schakowsky

“Powerful interest groups seldom lose major battles in Congress, but that is exactly
what happened when Congress created the Consumer Financial Protection Bureau in 2010.
Larry Kirsch and Robert Mayer have produced … an eminently readable and yet important
account of the fight to establish the CFPB. For those who care about consumer protection,
want to learn how laws get passed and new agencies created, or just enjoy a good real-life
David-and-Goliath struggle, this book is a must-read.” – Prof. Jeff Sovern, St. John’s Law School

“Financial Justice tells the powerful inside story of how civil rights, consumer, labor and other public
interest organizations worked together to play a crucial in role in creating the new
Consumer Financial Protection Bureau, with the authority and the mission to stand
up for families and protect our financial security. After years of reckless financial
industry deregulation and rampant abuse, the fight for the CFPB resulted in a major
civil and human rights triumph and a compelling chapter in the evolution of our democracy.”
– Wade Henderson, President and CEO, The Leadership Conference on Civil and Human Rights

“The book combines great character portraits of important back-stage players that
will interest the most demanding political junkie and meticulous research that will
bring class discussions of social movements, interest group politics and consumer
law alive.” – Peter Dreier, Dr. E.P. Clapp Distinguished Professor of Politics, Occidental College

“What sets Financial Justice apart from all the other books is its laser-like focus in chronicling the history
of how a group of consumer advocacy groups spearheaded by a newly-created organization
called Americans for Financial Reform used the economic meltdown to lobby for the
enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act.” – Alan S. Kaplinsky, Partner in Ballard Spahr law firm and editor of CFPB Monitor

[The book] “tells the gripping inside story of how a group of committed consumer,
civil rights, labor, fair lending and other advocates battled Wall Street and its
supporters to win substantial new consumer financial reforms for the nation… “Financial
Justice” reminds us that a small, committed band ultimately did defeat the Galactic
Empire. Whatever the outcome for the CFPB—and we sincerely hope it survives further
attacks—“Financial Justice” is an interesting and inspiring read.” – Consumer Action Insider

“Financial Justice explains the strategic decisions and policy choices that AFR had
to make to preserve and pass the strongest reforms possible. It has lessons for all
activists seeking to fight city hall or evil empires.” – Ed Mierzwinski, U.S. PIRG

“Their book is far from polemic. Instead, it digs in to how the sausage is made in
getting a piece of legislation passed through the American political machine, especially
when faced with fierce opposition from major financial players. They describe key
moments in the creation of the CFPB legislation: the formation of a unified and pragmatic
advocacy group called Americans for Financial Reform, the inevitable congressional
bargaining and compromise and the media campaign to get Americans on the side of consumer
financial reform…[The author make] dry, complicated topics like federal pre-emption
and congressional procedure accessible and entertaining. Interviews with important
political players provide a good dose of human drama.” – Devon Merling, Deseret News

Financial Justice is a crossover book with appeal to a variety of audiences. For the general reader,
the book is similar to bestsellers like Andrew Sorkin’s Too Big To Fail and Neil Irwin’s The Alchemist that provide an insider perspective on efforts to cope with the 2008 Financial Crisis
and try to prevent a future debacle. It also complements Robert Kaiser's Act of Congress in telling the story of the Dodd-Frank Act.

For citizen activists, the book tells the inspiring David vs. Goliath story. With
leadership from Elizabeth Warren, Heather Booth, and other, organizations drawn from
multiple social movements put aside their particularistic interests, forged a powerful
coalition, and accomplished the nearly impossible – enact legislation vehemently opposed
by the mighty financial services industries. In a larger sense, the book examines
whether future campaigns, built on a similar framework, can help refuel a progressive
politics in America.

For academic audiences, the book highlights the dynamics of contemporary U.S. social
movements and the federal legislative process of which they are a part. The book fits
nicely with classes in sociology, political science, law, and consumer affairs.

LARRY KIRSCH is an economist and managing partner of IMR Health Economics, a consulting
firm in Portland, OR. His consulting practice focuses on health insurance financing
and market practices and consumer protection. He has published extensively in the
areas of consumerism and health care, including “Do Product Disclosures Inform and
Protect Insurance Policyholders?” and “The State Attorney General as Consumer Advocate:
A Recent Effort to Tame Unfair Subprime Lending Practices.”

ROBERT N. MAYER, PhD, is a professor in the Department of Family and Consumer Studies
at the University of Utah. His published works include ABC-CLIO’s Encyclopedia of
the Consumer Movement and The Consumer Movement: Guardians of the Marketplace (Twayne
Publishing). He serves or has served on the editorial boards of multiple journals
and on boards of directors of numerous organizations, including the Consumer Federation
of America, the Consumer WebWatch Program of Consumers Union, the National Consumers
League, and DebtorWise Foundation. Mayer holds a doctorate in sociology from the University
of California, Berkeley.

Chapter 1: How Did We Ever Get Into This Mess?

This chapter serves two purposes. First, it introduces the three main protagonists
in the effort to create a new consumer protection agency: Professor Elizabeth Warren,
Representative Barney Frank, and veteran social organizer Heather Booth. In 2007,
all three saw major cracks in the U.S. economy and had different ideas about what
political responses were appropriate. In terms of its second function, the chapter
demonstrates the failure of existing regulatory agencies, especially the Federal Reserve,
to respond in a timely and effective manner to abuses of consumers in credit markets.
This failure was at the heart of Elizabeth Warren’s proposal for a new agency to protection
consumers in financial transactions.

Chapter 2: Elizabeth Warren Has a Notion

This chapter focuses on Elizabeth Warren as a “policy entrepreneur.” It details the
process by which she developed the idea of a new agency for consumers, provided it
with intellectual underpinnings, and placed it on the political agenda. During the
presidential campaign leading up to the November, 2008, elections, Warren gained the
endorsement of presidential candidates John Edwards, Hilary Clinton, and Barack Obama
for the idea of enhanced consumer protection. Then, shortly after the election, she
became chair of the Congressional Oversight Panel to oversee implementation of the
$700 billion Troubled Asset Relief Program. This position gave her a highly visible
platform from which to advocate for what was eventually dubbed the Consumer Financial
Protection Bureau (CFPB).

Chapter 3: The Magic Moment for Reform

This chapter details the obstacles and opportunities faced by advocates of financial
reform. It begins with the commanding political and economic power of the financial
services industry and shows how the concurrent Congressional debate over health care
reform threatened to stifle consideration of financial abuses. Yet advocates recognized
that political opportunities existed as well. The most obvious was the growing public
hostility toward Wall Street and its political backers and the willingness of the
White House and the Democratically-controlled Congress to respond. When the idea
was floated in early 2009 to create a formal coalition to pursue comprehensive financial
reform, progressive social movement organizations from across the spectrum were ready
to move.

Chapter 4: Activists Need Leaders, Too

This chapter describes the recruitment of an accomplished political strategist, Heather
Booth, to lead a new coalition of progressive groups -- Americans for Financial Reform
(AFR). Booth’s career as a political organizer is a window into virtually all of
the most important social movements of the last fifty years, including civil rights,
feminism, labor, and anti-war. Booth was perhaps uniquely qualified to gain the trust
of a diverse set of high-powered social movement organizations used to operating independently
of one another. Indeed, she had first-hand experience melding labor, energy and other
diverse groups into a viable coalition. To augment her substantial skills as a political
organizer, Booth recruited a small but highly talented staff with experience in economic
justice campaigns. Like chapter two focusing on Elizabeth Warren, this chapter provides
readers with insight into one of the most fascinating progressive activists of our
time.

Chapter 5: Coalescing the Coalition

This chapter details the process by which Booth and her deputies guided AFR’s member
organizations through the critical steps of forming a powerful coalition. These steps
included agreeing on a mission and set of concrete policy goals, mustering financial
and human resources, developing working rules to prevent organizational fragmentation
and policy incoherence, developing a sophisticated inside-outside strategy for exerting
political pressure, and smoothing over potential fault lines among diverse organizations.
Establishing the CFPB was only part of the larger legislative agenda, including highly-charged
issues such as preventing financial institutions from becoming “too big to fail,”
regulating the shadowy world of derivatives trading, and capping executive compensation.
In this sense, the campaign to establish the CFPB was part of a political battle whose
stakes could not have been higher and whose opponents could not have been more motivated.

Chapter 6: The Battle in the House

This chapter chronicles the fate the CFPB proposal as it wound its way through the
House of Representatives. Even with liberal Congressman Barney Frank at the helm
of the House Committee on Financial Services Committee, the non-governmental advocates
of the CFPB had to push their allies in the White House and the U.S. Congress for
the strongest possible agency. At the same time, they needed to fend off attacks by
the new agency’s opponents. Despite a Democratic majority in the House, passage of
financial reform legislative was hardly assured as many centrist Democrats were wary
of alienating financial constituencies.

Chapter 7: Wanted: A Few Votes in the Senate

Even after clearing the House, the proposed new agency suffered several near-death
experiences in the Senate. Advocates were willing to see no agency passed rather
than having one that was weak and largely symbolic. Members of Americans for Financial
Reform, Elizabeth Warren, and even some Hollywood stars steeled the resolve of Senator
Christopher Dodd. After abandoning unfruitful negotiations with his Republican colleagues
on the Senate Banking Committee, he brought a relatively strong bill to the full Senate.
There, supporters of the financial reform bill ran headlong into the prospect of a
Republican filibuster. Not only did the bill need the votes of a few Republicans;
activists had to holdi onto the votes of a few liberal Democrats who viewed the bill
as too soft on Wall Street. Moments of high drama ensued, but the Dodd-Frank Wall
Street Reform and Consumer Protection was finally passed by the Senate, avoided damaging
changes in the House-Senate Conference Committee, and signed by President Obama on
July 21, 2010.

Chapter 8: Auto Dealers Drive for an Exemption

This chapter and the one that follows are case studies of specific elements of the
CFPB debate that highlighted the possibilities and constraints faced by social movement
coalitions in legislative dynamics. Chapter eight focuses on the issue of exemptions
from the new agency’s authority on behalf of the politically powerful auto dealers.
As one can imagine, each industry potentially subject to the agency’s jurisdiction
argued that consumers needed greater protection in general but that their industry
served consumers well and did not need any additional regulation. In the end, auto
dealers were the only industry to successfully make this argument, but this episode
nevertheless reveals the limits of the coalition’s effort to control lenders and persuade
politicians.

Chapter 9: Preemption: The Role of State Reformers

Chapter nine presents a case study of another hotly-contested issue: the extent to
which federal control of lenders would trump or “preempt” the ability of states to
regulate financial services. Far from being an abstract or arcane constitutional
argument, the fight over preemption engaged a majority of state attorneys general
in a desperate effort to retain their ability to serve as laboratories of innovation
in the area of consumer financial protection. The preemption battle was resolved
largely in favor of the financial reform activists and reveals the importance of grassroots
political action.

Chapter 10: What Did the Advocates Accomplish and How?

This chapter addresses two questions: to what extent did the coalition spearheaded
by Americans for Financial Reform make a difference in the features and ultimate passage
of the Dodd-Frank Act; and by what means did they exert any influence that can be
properly attributed to them? Elizabeth Warren and AFR were the two most important
non-governmental advocates of reform, and their contributions turned out to be largely
complementary and entirely synergistic. It is unlikely that one would have succeeded
in creating the CFPB without the other. The chapter also contains the authors’ assessment
of ways in which the coalition fell short of its goals. The chapter both synthesizes
the keys to the coalition’s successes and examines the implications of its structure
and strategy for future attempts to stimulate progressive change.

Afterword: Looking Backward and Forward with Elizabeth Warren

This chapter gives prominence to the authors' interview of Elizabeth Warren. While
previous interviews in the book focus on the campaign to pass the Dodd-Frank Act and
establish the CFPB, our interview with Warren also contains her assessment of the
new agency’s initial performance and her assessment of its future. The Afterword
is written by legal scholar, Professor Norman Silber, who served as a consultant on
the overall project and has closely followed Warren’s legal writing and activism.